Every industry comes with its own language and its own jargon. For example if a builder is talking about flashing he is probably talking about a piece metal or plastic, installed to prevent water from penetrating the structure and not the alternative.

The finance and credit management industry is no exception, there are a number of terms and phrases that are common to the industry but probably less so for business people where finance is only one component of their working day. Below are some easy-to-understand definitions of cash flow jargon and what they mean about your business to help business owners:

Cash: Cash refers to currency, the amount of money held in a company's bank accounts and items such as cheques and bank drafts, which are exchangeable for cash. Often temporary short-term investments that are highly liquid in nature are included in this category.

Current Asset: Assets refer to the economic resources of a company; items that will result in cash inflow or savings of cash outflow for the business. Current assets are those assets of a company that are expected to be consumed within a single operating cycle - generally one year for most businesses. Examples of current assets include accounts receivable, prepaid expenses, inventory and cash.

Current Liability: Liabilities refer to the economic obligations of a company; items that will result in cash outflow or loss of cash inflow. Current liabilities represent those obligations that require payment within a business's operating cycle. Examples of current liabilities include short-term loans, employee wages and accounts payable.

Long term asset/Long term liability: These refer to the assets and liabilities that will not mature, expire or fall due within a single business operating cycle. This includes long-term assets such as property, plant and equipment and long-term liabilities such as a mortgages or long-term leases. It is important to note that whilst an item such as a mortgage is considered a long-term liability, any expenses due on it in the short-term, such as interest payments, is a current liability.

Net Working Capital: This refers to current assets less current liabilities; it measures the amount of residual capital available in a business operating cycle after immediate obligations are met. A positive working capital ratio reflects a financially stable business.

Current Ratio: The current ratio is derived from current assets divided by current liabilities. It indicates the ability of a business to repay its debts as they fall due. Generally speaking a minimum current ratio of 1 is acceptable - indicating that the business holds a level of current assets required to meet its current obligations at least once. Considerations of what is a good or bad current ratio differ across industries, though a current ratio of less than one usually suggests that a business has difficulties meeting its current obligations and a very high current ratio may be an indication that a business is not using its current assets as efficiently as it could. The current ratio is often used as a self-measure by businesses to observe changes in its solvency over time. It provides insight into the effect of financial management measures on a business's liquidity and cash flow.

Quick Ratio: The quick ratio is calculated as current assets less inventory, divided by current liabilities. This ratio was developed to provide a more accurate measure of a business's debt payment abilities than current ratio. Inventory is subtracted from current assets as it is often more difficult to liquidate inventory than other current assets, therefore it is not always as useful in the repayment of debt obligations. 

Accounts Receivable: Accounts receivable indicates the amount of money owed to you by customers. It is incurred as a by-product of credit sales.

Accounts Receivable Aging: Accounts receivable aging is accounts receivable analysed in the context of when the payments fall due. The due dates are often grouped in monthly periods (i.e. 30, 90, 120 days past due). Whilst the ideal collection time will differ across industries it is generally a good indicator if the debts that are most overdue constitute a low percentage of your total outstanding accounts receivable.  If this percentage begins to increase this may reflect a growing collections problem.

Accounts Receivable Days Sales Outstanding: Days sales outstanding is accounts receivable divided by average daily sales. It is used to measure how quickly a company moves to collect revenue after a sale has been made. The lower the number, the quicker the company collects revenue. Some businesses will calculate this measure as accounts receivable divided by average daily credit sales for a more specific measure.

Inventory: Inventory is the value of the stock a company holds for sale to customers. The category includes not only ready-for-sale merchandise but also raw materials and goods in production.

Slow-moving Stock: As suggested by its title, slow-moving stock represents the products in inventory that are selling at a slower than expected rate. For example if a business aims to hold a product for 30 days before sale, a product that has three months worth of sales in stock would be considered slow moving.

Stock-out Rate: A stock-out refers to instances when a customer's order cannot be filled as the product requested is not available. A stock-out rate is the number of times this instance occurs per 100 product orders. If the stock-out rate is high this may be an indication that the business is taking too long to replenish its stock and risks losing sales because of it.